Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year
Question:
- Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead.
Given the information above, total cash outflows for 2011 would be:
- $417,000
- $1,200,000
- $1,162,500
- $454,500
Correct Answer:$1,162,500
Cash outflow: $1,200,000 - $37,500 = $1,162,500
2.Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead.
f the desired ending cash balance is $45,000, how much must Winthrop borrow during the year?
- $225,000
- $142,500
- $180,000
- $187,500
Correct Answer:$187,500
Cash available:
(1,500,000 x 20%) + (1,500,000 x 80% x 60%) = $1,020,000
Total cash needed:
$1,200,000 - $37,500 + $45,000 = $1,207,500
Total cash borrowed:
$1,020,000 - $1,207,500 = ($187,500)
Can someone please explain how these were answered in detail